Europe, Euro Zone | featured news

Homeowners have told of how sales of their properties are on hold and businesses have called for clarity amid banking uncertainty in Cyprus. The country is braced for an emergency session of its parliament, and a planned vote, regarding a 10bn euro ($13bn; £9bn) financial rescue.

Italy's new parliament met on Friday for the first time since last month's inconclusive election with no sign of a deal to end the stalemate and yield a government able to address the deep problems in the euro zone's third-largest economy.

Europe has spent hundreds of billions of euros rescuing its banks but may have lost an entire generation of young people in the process, the president of the European Parliament said.

The data is likely to put pressure on the European Central Bank to cut interest rates at its next meeting.

The European Union's official economists predicted the euro-zone economy will shrink in 2013 for the second year in a row and for the third year of the past five, in a forecast that sees little hope that easing financial-market tensions in the region will provide a jolt to the real economy any time soon.

Even as the euro zone periphery starts to spy some glimmers of hope, concern is mounting that Germany is drifting apart from other countries at the core of the single currency bloc, notably France.

The vast U.S. services sector expanded against last month, extending a three-year run of growth, while European business optimism hit an eight-month high, suggesting the euro zone economy was starting to recover.

Standard & Poor's ratings agency on Tuesday upgraded Greece's credit grade by 6 notches, yanking the debt-heavy country out of default but still keeping its devalued bonds in junk status.

Greek pension funds will not take part in a debt buy-back that is a key part of the country's international bailout, Greek Prime Minister Antonis Samaras said in a newspaper interview.

The euro zone economy is on course for its weakest quarter since the dark days of early 2009, according to business surveys that showed companies toiling against shrinking order books in November.